Wednesday, October 20, 2010
9:59:10 PM EDT

Stay Nimble

by
Scott Hawes

Editor's Note:
Good evening. I think we are going to see this volatility continue. Tuesday's losses were reversed today and I would not be surprised if today's gains are reversed tomorrow. Staying nimble and working both sides of the market is the right strategy. We have several positions still waiting to be triggered which could happen at any time. Please email me with any questions.

Comments:
10/20: DRC traded in tight range and is still above its 20 & 50-day SMA's, and is maintaining the upward trend line that began on 8/25. Readers may want to consider tighter stops at $37.40 (5 cents below Tuesday's low) or $36.90. Personally, I would use $36.90 which is below the important aforementioned support levels. I've adjusted the targets and suggest readers continue to use strength to exit positions or tighten stops to protect capital. ,p>
10/19: The oil services sector took a hit today as the group lost more than -3%. DRC fared a little better but our position has gone from a +25% gain to a -20% loss. The Peoples Bank of China unexpectedly rose interest rates which caused the US Dollar to surge higher, and the whole commodity sector took a lambasting. It is too early to tell whether today's sell-off in commodities is the start of a bigger decline or a knee jerk reaction. Technically, DRC is still above its 20 & 50-day SMA's and is maintaining an upward trend line that began on 8/25. Readers may want to consider tighter stops at $37.40 (5 cents below today's low) or $36.90. Personally, I would use $36.90 which is below the important aforementioned support levels. I've adjusted the targets and suggest readers continue to use strength to exit positions or tighten stops to protect capital.

Comments:
10/20: My comments from 10/19 remain the same. We want to launch bullish positions on a pullback to trend line support and prior resistance from July, then target a move back towards its recent highs.

10/19: Raymond James cut FSLR to Market Perform from Outperform in the pre-market this morning. The stock sold off about -2% and there could be more to come. However, FSLR continues to look bullish and has solid support at $140 which is near the primary upward trend line and will provide a solid entry point. As such, I would like to lower the trigger to $140.50 and target a move up towards $150.

10/18: FSLR went in the opposite direction of our trigger to enter long positions. Let's remain patient and keep our trigger at $142.50.

10/16: Shares of FSLR have been marching higher after producing a huge (bullish) double bottom pattern with the lows in February and June. Now the stock has created a more bullish pattern of rally, consolidate, rally, consolidate. After two weeks of correcting traders are now buying the dip in FLSR near support in the $137-140 zone.

Aggressive traders could launch positions right now following Friday's bounce from $140. However, I suspect we'll see a better entry point on a minor dip this week. I'm suggesting we use a trigger at $142.50 to buy calls. If triggered we'll use a wide stop loss at $135.95 since FSLR can be so volatile (as an alternative more conservative traders could put their stop closer to $140). If triggered our first target is $145.00. Our second target is $147.50. Our final target is $149.75. More aggressive traders could aim for the $160 area. FYI: Investors should note that FSLR is due to report earnings on October 28th. Earnings reports can significantly raise our risk.

Suggested Position:

Trigger to buy calls @ $140.50.

BUY the November $150 calls.

Entry on October xxth at $ xx.xx
Earnings Date 10/28/10 (unconfirmed)
Average Daily Volume = 1.5 million
Listed on October 16th, 2010

Comments:
10/20: GNK did manage a bounce up to $16.15 which is where the stock found resistance. The problem is we don't have a good reference point to tighten the stop. Let's see how much more we can get out of the position and keep looking for areas to move up the stop. $16.22 is resistance and then a gap fill near $16.40.

10/19: GNK fell apart today and we are close to being stopped out. GNK is involved in shipping commodities and the news out of China is affecting the entire space. It is too early to tell whether this is a one day event or a knee jerk reaction. Technically, the stock has closed below its moving averages and looks to be headed lower. If GNK can manage a bounce back up towards $16.10 I suggest closing positions or tightening stops to protect capital.

Current Position: Long November $17.00 CALL, entry was at $0.80

Note: Readers who want to give this more time to work may want to consider buying the JAN 2011 $17.50 CALLS

Entry on October 12, 2010
Earnings 11/1/2010 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on October 11, 2010

Comments:
10/20: HUM is running away from us as the stock took back all of yesterday's losses and printed a new 52-week high today. Let's keep the trigger in place and use a dip to $52.50 as a buying opportunity. Nothing has changed from the released play on 10/16 listed below. Should we get triggered I suggest buying the January options to give this some time to work.

10/16: Check out the HMO healthcare index. Investor sentiment for the healthcare sector has changed. Fears about the healthcare reform seem to have faded and now the sector is breaking out to new three-year highs. HUM is helping lead the way. Shares have been very strong this past week with a rally toward the top of its bullish channel. We want to hop on board but wait for a better entry point.

I am suggesting readers use a trigger to buy calls at $52.50. More cautious traders could look for a dip closer $51.00 but I don't think we'll see HUM pullback that low. If we are triggered at $52.50 I'm suggesting a stop loss at $49.75. Our first target is $54.90. Our second target is $57.25. Our third, longer-term target is $59.00. Time frame is six to eight weeks. Technical traders will note that the P&F chart is bullish with a $66 target. FYI: HUM is due to report earnings on November 1st. We normally want to avoid holding over earnings but I would make an exception for HUM.

Suggested Position:

Trigger to buy calls at $52.50

BUY the 2011 January $55 calls.

Entry on October xxth at $ xx.xx
Earnings Date 11/01/10 (confirmed)
Average Daily Volume = 2.1 million
Listed on October 16th, 2010

Comments:
10/21: JEF closed above its 50-day SMA for the first time in a month which should provide support on a pullback. We are likely going to get triggered to launch bullish positions tomorrow on a breakout. Readers may want to consider an entry on a dip to the 50-day (currently $23.50) as the stock keeps getting bought, but I would keep a tight leash on the trade.

10/20: Investment Banks are beginning to trade well, especially those that have little risk exposure to mortgage backed securities like many of the money center banks. JEF should do well in this era of corporate advisory services and M&A activity. JEF could even be a takeover candidate themselves. I like JEF to trade higher as long as the stock breaks out above today's highs. Technically, The volume patterns look good and JEF has closed above short term resistance from the past couple of weeks at $23.50 for two consecutive days. I suggest we enter long positions if the stock trades to $23.91 which is above today's highs. Our stop will be $22.75 and our targets are near the September and August highs, which are +5% and +7.5% from our trigger.

Trigger: $23.91

Suggested Position: Buy December $24.00 CALL, current ask $1.10

Entry on October xx
Earnings Date 1/20/11 (unconfirmed)
Average Daily Volume: 1.1 million
Listed on October 19, 2010

Comments:
10/20: We are getting closer to our trigger which may happen tomorrow or Friday. My comments bellow remain valid.

10/19: SHLD held up very well today considering the deep broad market sell-off. I suggest we play this conservative and keep the set-up in place, however, a dip down towards $73.00 also offers a compelling set-up. This is near the 20-day SMA and upward trend line that started on 8/24. The problem is SHLD could blow right through this level if the broader market correction picks up steam. We may consider a lower trigger in the coming days but we have to see the price action first.

10/18: Shares of SHLD have been trending higher since their lows near $60.00 back in August. The stock broke out of a multi-week consolidation area that began on 9/27 and looks poised for a continued move higher. Add in the fact that SHLD has a high short interest ratio and it could mean a short squeeze is on the horizon. There is also a lot of open air above $77.00 which means a breakout higher could quickly gain momentum. I suggest readers initiate long positions with a trigger $77.10 which is well above the past few day's highs. This allows SHLD to prove that it can make a run higher and should be the catalyst for a move towards $82.00, or higher. Our initial stop will be $70.75 and it will be adjusted once we are in the position.

Comments:
10/20: TC recovered nicely but the stock still has a lot of work to do to regain the losses from Tuesday. We are in the same boat as GNK in that we do not have a good reference to raise the stop. Let's see how much more we can get out of the position and keep looking for areas to move up the stop. All of the targets above remain valid.

10/19: Ouch, the profit taking we feared came in full force today and our gain in TC was reversed into a loss. The Peoples Bank of China unexpectedly rose interest rates which caused the US Dollar to surge higher, and the whole commodity sector took a lambasting. It is too early to tell whether today's sell-off in commodities is the start of a bigger decline or a knee jerk reaction. Only time will tell but readers should use caution. TC found support at $10.64 today and also has support at $10.55. Our stop is just below these levels. I've added a lower target of $11.10 where readers should consider exiting positions or tightening stops on bounces.

10/18: TC drifted sideways in a fairly tight range on Monday. The stock closed near its highs and continues to look bullish, however, be aware of some possible profit taking in the coming days which I would use an opportunity to launch new positions. If TC breaks above last week's highs there is little resistance until the $12.50 area which is just above our final target. Tighter stops could be considered in the $10.80 area to limit downside risk.

Current Position: Long November $11.00 CALL, entry was at $0.90

Entry on October 12
Earnings 10/4/2010 (unconfirmed)
Average Daily Volume: 1.7 million
Listed on October 9, 2010

Comments:
10/20: There are not many changes to the comments below. We are getting whipsawed in a fairly tight range and ATK refuses to break lower as we have anticipated, which is when we want to be closing positions or tightening stops. I see no reason why ATK won't trade down to its 50-day SMA.

10/19: ATK lost -1.6% today and the stock looks vulnerable here. The stock broke a short term upward trend line, closed below the 20-day SMA, and closed at its lowest level since 10/4. The selling in this stock should continue in the coming days which readers should use as an opportunity to exit positions or tighten stops. I adjusted the targets slightly to account for the rising 50-day SMA.

10/18: The bearish set-up in ATK remains in tact but the stock has stubbornly refused to break lower. I've raised the second target to $71.70 which is my primary target and just above the 50-day SMA. I think we'll see some selling in this stock in the coming days which readers should use as an opportunity to exit positions or tighten stops. All of James comments below remain valid.

10/16 (James): Shares of ATK continue to churn sideways under resistance near $75.00 and its descending 200-dma. I don't see any changes from my Thursday comments. Readers may want to wait for a move under $73.25 before launching new positions. FYI: ATK is due to report earnings on November 4th, before the opening bell. Wall Street expects a profit of $2.81 a share.

Comments:
10/20: FAST rolled over after their earnings report and has made a series of lower lows and lower highs over the past 8 trading sessions. What has me concerned is this may be forming a bearish descending wedge pattern. The bottom line is we are most likely going to need a more severe broader market correction for this trade to turn into a profitable one. A move the 50-day SMA should give us +35% gain. All of my comments below remain the same.

10/19: FAST held up relatively well today, maybe because of the strong housing starts data released in the pre-market. However, new permits went in the wrong direction. The 50 & 100-day SMA are near the first target. This should give us a +35% gain. I suggest using this area to either take profits or tighten stops to protect them. If this level breaks keep an eye on $50.00 as the next support level.

10/16: (James)Traders were disappointed with FAST's recent earnings report and guidance. Shares had soared from $45 to $55 in just a few weeks and the stock plunged on the earnings news (Oct. 12th). The bounce attempts this week were also sold sharply and FAST looks poised for a much deeper correction.

I am suggesting new bearish positions now at current levels. We'll use a stop loss at $54.25. Our first target is 50.75 near the simple 50-dma. Our second target is $48.25, but watch for potential support at the rising 200-dma. It is possible that FAST actually sinks lower since the larger pattern on the weekly chart is one of lower highs and lower lows.

Current Position: Long November $50.00 PUT, entry was at $1.00

Entry on October 18, 2010
Earnings Date 10/12/10
Average Daily Volume = 1.0 million
Listed on October 16, 2010

Comments:
10/19 & 10/20: Something is holding PNC up and I can not figure out why, other than it may be due to upcoming earnings. The stock is set to report earnings on Thursday before the bell so if you are not comfortable holding positions you need to exit tomorrow before the bell. Holding positions is an aggressive strategy that may or may not work. Lightening up on positions is also another option. The news out of the banking sector today has me inclined to hold positions, however, I still advocate using weakness to exit positions and preserve capital. Our stop is overhead.

10/18: After reaching our first target on Thursday and coming close to our second target on Friday, PNC had a snap back rally today and gained more than +3% as banks were the strongest performing sector. PNC remains below its 50-day SMA and primary downtrend line so the bearish case remains in tact. Launching new positions at these levels makes a lot of sense for a quick trade lower, but the broader market needs to correct along side PNC for it to be successful. Readers with current positions should use weakness to close positions. $50.35 and $49.50 are my primary targets.

Current Position: Long November $48.00 PUT, entry was at $1.26

Entry on September 30, 2010
Earnings: 10/21/2010 (unconfirmed)
Average Daily Volume: 5 million
Listed on September 29, 2010